The apex court further ruled that arbitrators in a case, unless it is an international arbitration case, cannot determine their fee without consent of the parties involved.
The Supreme Court on Tuesday held that arbitrators do not have the power to unilaterally determine their own fees, as it violates the principles of party autonomy. The ruling will tantamount to putting a cap on fees paid to arbitrators.
The ceiling of Rs 30 lakh is applicable to each individual arbitrator, and not the arbitral tribunal as a whole, where it consists of three or more arbitrators, the apex court said, adding that a sole arbitrator shall be paid 25% over and above this amount, in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996.
Upholding the government’s stand that under the Act, the upper limit of what an arbitrator can charge is Rs 30 lakh per individual if the quantum of dispute is more than Rs 20 crore, a three-judge bench led by Justice DY Chandrachud said that a unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.
However, it said that the arbitral tribunal has the discretion to apportion the costs (including arbitrators’ fee and expenses) between the parties in terms of Section 31(8) and Section 31A of the Act, and also demand a deposit (advance on costs) in accordance with Section 38. If, while fixing costs or deposits, the arbitral tribunal makes any finding relating to arbitrators’ fees (in the absence of an agreement between the parties and arbitrators), it cannot be enforced in favour of the arbitrators.
The apex court further ruled that arbitrators in a case, unless it is an international arbitration case, cannot determine their fee without consent of the parties involved. The apex court bench, also comprising Justice Sanjiv Khanna and Justice Surya Kant, was hearing a petition by Oil and Natural Gas Corp (ONGC) seeking relief against an arbitration panel which had raised its fee midway.
The state-owned oil exploration company had hired infrastructure company Afcons Gunanusa to construct an ICP-R platform in Arabian Sea, in Mumbai High, in 2009. An arbitration panel was formed after a dispute arose between the parties in 2015. Even though Afcons had agreed to the revised fee, ONGC had declined to pay above the limit set in the 1996 Act.
The SC, however, allowed ONGC and Afcons to reconstitute a fresh arbitral tribunal. It also said that the PSU can pay the tribunal as per the limits fixed in the Arbitration Act. However, if it had already paid more than what was recommended under the law, then that money will not be refunded to it, it held.
